Trading Week Ahead

Week of April 22

This week's major economic events include US inflation and GDP figures, along with the BOJ's rate decision.

Week in Review

Central bank speakers dominated the narrative last week. Fed's Chair Jerome Powell emphasised maintaining restrictive policy until inflation falls, and the market now expects no rate cuts until the third quarter. In Europe, ECB President Christine Lagarde said a decision on monetary policy changes would be available in June, firming expectations of a June rate cut, while BOE's Governor Andrew Bailey said inflation would fall faster next month. However, despite UK jobs coming in weaker than forecast, inflation and wages surprised to the upside.

China's first-quarter GDP exceeded expectations in Asia, but industrial capacity disappointed. Notably, ASML's disappointing sales orders were partially attributed to China's restrictions, which weighed on the broader tech stocks. Meanwhile, the IMF marginally increased its 2022 global growth forecast to 3.2%.

Geopolitics centred on Iran launching missiles intercepted by Israel, which saw a mirrored reaction in response.

April US manufacturing came below forecast, with prices reaching 13-month highs.

Biggest Market Movers

• Crude oil prices lost over 5% as market sentiment shifted, believing geopolitical tensions in the Middle East were easing.
• Bitcoin and other cryptocurrencies experienced volatility ahead of the halving event over the weekend, with the former sliding some 8% through the week only to recover it back.
• The British pound dropped to a 5-month low against the US dollar following weaker UK unemployment data but regained footing after inflation figures were released.
• Japan continued efforts to devalue the yen, which is nearing 155 against the dollar, above intervention levels.

Top Events in the Week Ahead

The coming week will see a gradual start of economic releases, with a highlight expected in the latter half from US GDP and the Fed's preferred inflation measure - PCE.

US GDP and Fed's PCE in Focus

A series of US data begins with durable goods orders expected to decrease substantially; signalling businesses have less confidence in the economic outlook. However, the week's primary focus is likely first-quarter GDP figures from the largest global economy on Thursday, with annualised growth forecast to slow to 2.8% from 3.4%.

Markets will also keenly watch the Core PCE price index released the following day, as it is anticipated to once again diverge from CPI, declining slightly to 2.7% from 2.8%. This could provide relief to concerns the Fed may delay rate cuts. Conversely, even a modest beat could exacerbate such worries. Gold could react negatively to an increase in GDP or PCE, potentially revisiting $2350 per ounce. Conversely, it could print new highs.

Flash April PMIs and a Better Economy

This week's main event for Europe could be the release of the flash PMI figures for key economies, including France and Germany. There has been some indication that economic activity across the Eurozone may be rebounding following PMI results last month outperforming expectations, and analysts will be looking for this positive trend to continue. The Composite Eurozone PMI is expected to further advance into expansionary territory, as with the UK's Composite PMI. Beating estimates could support EURUSD towards $1.07, if not beyond, whereas weaker numbers could weigh on prices, exposing the pair to drops under $1.06.

BOJ Policy Decision

On Friday, the BOJ will hold its monetary policy decision, where analysts unanimously predict no change. Investors will closely monitor the BOJ's quarterly economic projections to identify any adjustments that could justify raising interest rates. With USDJPY at multiyear highs, an intervention could be seen ahead of the event. In such an event, the 153 handle would be in focus.

Other Events, Earnings

China will fix its loan prime rate on Monday. Tuesday sees the US 'redbook' retail sales release. Wednesday includes the German Ifo business survey and Australian consumer price figures. Germany's GfK consumer sentiment survey is scheduled for Thursday. Friday has US personal income and spending data.

Meanwhile, corporate earnings season will be intensifying throughout the week with major reports expected from Verizon, Tesla, Visa, Danaher, Meta, IBM, Microsoft, Alphabet, Merck, AstraZeneca, Exxon Mobil, Chevron, AbbVie and Colgate-Palmolive.